Calculate the standard deviation for the portfolio

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The stock of two companies will have the following returns for different states of the economy in the coming year: State of the economy Probability ABC XYZ Risk-free Good .60 23% 15% 5% Poor .40 5% 7% 5% Form a portfolio with 25 percent in ABC, 50 percent in XYZ, and the remaining amount in the risk-free asset. The risk-free rate is 5 percent. The beta of ABC is 1.4. The beta of XYZ is 1.0. Hint: Remember the value of the market beta. Calculate the expected return for the portfolio. Calculate the standard deviation for the portfolio. What is the required return for the portfolio (use the CAPM)?

Reference no: EM13944477

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